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Shri Gayatri, LLC v. The Charter Oak Fire Insurance Co.

United States District Court, D. Massachusetts

September 12, 2016

SHRI GAYATRI, LLC, Plaintiff
v.
THE CHARTER OAK FIRE INSURANCE COMPANY, Defendant.

          MEMORANDUM OF DECISION AND ORDER FOR ENTRY OF JDUGMENT

          TIMOTHY S. HILLMAN, UNITED STATES DISTRICT JUDGE

         Introduction

         Shri Gayatri, LLC (“Shri Gayatri”) filed suit against The Charter Oak Fire Insurance Company (“Charter Oak”) seeking a declaratory judgment that that it is entitled to an award for Replacement Cost Value of the loss owed and Ordinance and Law loss under an insurance policy, Policy Number I-660-7496M38A-COF-10 (“Policy”) issued to Shri Gayatri that covered a commercial property owned by it and operated as a motel at 66-68 Haynes Street, Sturbridge, MA. More specifically, the property was a Days Inn consisting of four buildings, which housed thirty-four (34) rooms, and a pool (“Property”). Shri Gayatri has also asserted claims for breach of the implied covenant of good faith and fair dealing, and violation of the Massachusetts Consumer Protection Act, Mass.Gen.L. ch. 93A, §§2, 11 and Mass.Gen.L. ch. 176D, §§ 3(9)(f), (g) (“Chapter 93A claim”). Charter Oak has filed a Counterclaim seeking a declaratory judgment that it has no obligation to pay Shri Gayatri for: (1) the difference between the replacement and actual cash value for any property loss or damage; and (2) the increased cost of construction of building, zoning and use ordinance. This Memorandum of Decision and Order For Entry Of Judgment addresses Defendant's Motion For Summary Judgment (Docket No. 47). For the reasons set for the below, that motion is granted.

         Relevant Policy Provisions

         Replacement Cost

         The Policy contains the following provisions relevant to replacement cost coverage:

4. Loss Payment
a. In the event of [covered] loss or damage … at our option, [Charter Oak] will either:
(1) Pay the value of lost or damaged property;
(2) Pay the cost of repairing or replacing the lost or damaged property, subject to b. below;
(3) Take all or any part of the property at an agreed or appraised value; or
(4) Repair, rebuild or replace the property with other property of like kind and quality, subject to b. below.
[Charter Oak] will determine the value of lost or damaged property, or the cost of its repair or replacement, in accordance with the applicable terms of the Valuation Condition in this Coverage Form or any applicable provision which amends or supersedes the Valuation Condition.
b. The cost to repair, rebuild or replace does not include the increased cost attributable to enforcement of any ordinance or law regulating the construction, use or repair of any properly, except as provided under the increased Cost of Construction or Repair Additional Coverage.
….
6. Valuation
[Charter Oak] will determine the value of Covered Property in the event of covered loss or damage as follows:
a. At actual cash value as of the time of the loss or damage, .… The Policy further provides “Replacement Cost” as an “Optional Coverage, ”, in relevant part, as follows:
3. Replacement Cost
a. Replacement Cost (without deduction for depreciation) replaces the term Actual Cash Value provisions in a., e. and h. of the Loss Condition, Valuation, in Section E.6. of this Coverage Form. ….
d. You may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis … .
e. [Charter Oak] will not pay on a replacement cost basis for any loss or damage:
(1) Until the lost or damaged property is actually repaired or replaced; and
(2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.

         The Policy contains the following Endorsement as required under Massachusetts law:

C. Paragraph 3.e. of the REPLACEMENT COST Optional Coverage is replaced by the following:
e. [Charter Oak] will not pay on a replacement cost basis for any loss or damage:
(1) Until the lost or damaged property is actually repaired or replaced:
(a) On the described premises; or
(b) At some other location in the Commonwealth of Massachusetts;
(2) Unless the repairs or replacement are made within a reasonable time, but no more than 2 years after the loss or damage.

         Ordinance or Law Coverage

         The Policy contains the following provisions relevant to ordinance of law coverage:

2. The following coverages are added … Each of these Additional Coverages is additional insurance unless otherwise indicated.
a. Ordinance or Law
(1) If a Covered Cause of Loss occurs to Covered Building Property, [Charter Oak] will pay for:
(a) Loss to the Undamaged Portion of the Building caused by enforcement of any ordinance or law that:
(i) Requires the demolition of parts of the same property not damaged by a Covered Cause of Loss;
(ii) Regulates the construction or repair of buildings, or establishes zoning or land use requirements at the ...

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